Chinese firm wins auction for most of A123’s assets

A Chinese company has won a politically charged auction for nearly all of A123 Systems Inc., the Waltham batter maker that filed for bankruptcy protection after receiving hundreds of millions of dollars of government support, said an adviser who was present at the auction.

Wanxiang Group, an auto parts conglomerate, outbid Johnson Controls Inc., of Milwaukee, and Japan’s NEC Corp., which had teamed up to bid for A123’s assets, according to the adviser, who was not authorized to speak publicly because the deal has not been finalized.

Among the assets Wanxiang will buy are two plants in Michigan that were largely financed by US taxpayers. Wanxiang will not get A123’s assets related to defense contracts. Those will go to another bidder, Navitas Systems LLC, an Illinois battery company, according to the adviser

Advertisement - Continue Reading Below

Together, the two deals are valued at upwards of $250 million, the adviser said. A sales hearing before a bankruptcy judge in Delaware is scheduled for Tuesday.

Representatives for Wanxiang and A123 could not immediately be reached. In a letter sent to A123 chief executive David Vieau on Nov. 15, Pin Ni, head of Wanxiang’s North American operations, said the Chinese company wanted to help A123 grow in the United States.

“We are committed to the future success of A123,” Ni wrote. “With the financial backing of Wanxiang America, the extensive U.S. business operations of A123 will continue unabated.”

Wanxiang, China’s largest auto-parts manufacturer, has courted A123 for months. In August, Wanxiang agreed to invest up to $465 million in A123 in exchange for a controlling stake in the struggling battery maker’s operations.

That deal, however, raised criticisms in Congress about China’s acquiring sensitive technology developed with the support of the US government.

With the completion of the Wanxiang deal uncertain and cash running short, A123 filed for protection under federal bankruptcy law in mid-October and agreed to sell its automotive business assets to Johnson Controls in a $125 million transaction.

A123’s bankruptcy has been heavily scrutinized because the Waltham firm received millions of US government dollars, including nearly $250 million in stimulus funds that were used to build up A123’s automotive-manufacturing capabilities in Michigan.

Founded in 2001, A123 built its name around a promising lithium ion technology developed at the Massachusetts Institute of Technology that produced high-powered, long-lasting batteries that could be used in many new ways, including in electric cars. The company landed power-tool giant Black & Decker as its first customer, and later produced batteries for cars and power storage for the electric grid.

The company went public in 2009, raising $380 million in its initial stock offering. At its height, A123 employed several thousand in Massachusetts, Michigan, China, and Germany.

A123 was viewed by the administrations of President Obama and Governor Deval Patrick and many industry analysts as key component of a clean energy-driven economy.

But high production costs, the slow adoption of electric vehicles, and a battery recall that cost tens of millions of dollars ultimately brought down the company.